Australian family law provides that property distribution between couples or cohabiting spouses can be determined by entering into property agreements at the time of separation. Property agreements may be signed before, during and after marriage or cohabitation.
Property agreements typically include the following:
Background information on husband and wife or partner; income status of husband and wife or partner, personal and joint property, debt, financial resources; The circumstances that both parties can reasonably foresee at the time of signing the agreement (including the birth of children, serious injuries, illness, death, unemployment, failure of business, inheritance, etc.); If the property agreement contains alimony between spouses, the specific amount of alimony should be specified. In some cases, the parties to the agreement may agree to terminate the maintenance obligations of one or both of them to their spouse or partner; a declaration of separation, once separated, requires at least one of the parties to sign the declaration of separation before the property agreement enters into force formally; The confirmation signed by both lawyers has provided their clients with a statement of independent legal opinion. Australian family law requires both parties to a property agreement to seek independent legal advice before signing an agreement.
Pre-marital / pre-cohabitation property agreement
More and more people hope to sign a property agreement with each other before marriage / cohabitation to protect their pre-marital / cohabitation property and possible future grants. But the appropriateness of pre-marital / cohabitation property agreements depends on the circumstances. For example, pre-marital / pre-cohabitation property agreements are more appropriate for couples who already have a history of marriage, have children, and have stable properties.
A young partner with a plan to have a child
For young couples who do not have a lot of pre-marital property or have plans to have children, the pre-marital / pre-cohabitation property agreements need to be considered more complex and may not be appropriate. This is because it is difficult to foresee the future evolution of property and income between the two sides, as well as some other possible developments. Property agreements, for example, could be ruled invalid when there are major changes in child-rearing arrangements and continued implementation of the agreement will result in financial difficulties for one side.
Therefore, it is best to document in detail what the parties could foresee before signing the agreement. If necessary, the property agreement should contain an termination clause that stipulates that the property agreement shall cease to take effect in whole or in part at the time of certain events (such as the birth of a child) or after a certain period of time (such as marriage for more than five years).
A partner with a wide disparity in economic strength
When the economic power gap between the partners is large, the stronger one often wants to protect his or her property or future inheritance and gifts by signing a property agreement. In order to reduce the risk of invalidation of the property agreement, the parties to the agreement need to pay special attention to the following:
Both parties should unreservedly disclose their property status (including overseas assets) to the other; The parties to the agreement need to agree on the value of the property and, if they are unable to agree, a professional appraiser is required to evaluate the property or business.
Grounds for invalidating the property agreement
Section 90K of the Australian Family Act provides for several cases in which property agreements are invalid. The main cases are that property agreements are concluded through fraud, coercion and undue pressure, or that one party is unjustifiably unfair. Australia's Supreme Court gave a clearer explanation of the latter two cases in the Thorne v Kennedy [2017] HCA 49 case at the end of last year.
Thorne and Kennedy met and quickly got engaged through a dating site. Thorne was 36 years old, lived in the Middle East and had little property. Kennedy was 67 years old and was a real estate developer in Australia. Thorne moved to Australia in early 2007 and plans to marry on September 30, 2007.
A few days before the wedding, Kennedy asked Thorne to sign a prenuptial property agreement that said, "if the couple were separated after three years of marriage and had no children, Kennedy would only have to pay Thorne A $50,000." Kennedy made it clear. If Thorne does not sign this agreement, the wedding will be cancelled. Although Thorne's attorney pointed out that the agreement was highly unreasonable, Thorne signed the agreement despite lawyers' objections.
Shortly after their marriage, Thorne and Kennedy signed, at the request of Kennedy, an agreement on marital property, which did not differ in any substance from the previous agreement. Four years later, Kennedy signed the final separation statement of the property agreement, formally separated in August 2011, with no children at the time of separation. In April 2012, Kennedy filed a suit with the Family Law Court, demanding that the two property agreements be invalidated. The two sides redivided the property. The first instance judge upheld Thorne's claim, Kennedy appealed, the court of second instance quashed the first instance decision, and finally Thorne appealed to the Supreme Court of Australia. The Supreme Court judges supported Thorne's request without exception and ruled that the property agreement was null and void. The reason is that Kennedy put undue pressure on the signing of the agreement unjustifiably unfair.
The Supreme Court cited the following criteria to help determine whether there was undue pressure:
Whether the agreement gives the two sides room for negotiation; the emotional state when signing the agreement, including whether the agreement is clear or implied that the agreement will end; whether the agreement gives the two sides sufficient time to think; the nature of the relationship between the two sides of the agreement; The state of the property of both parties at the time of signing the agreement; whether the parties to the agreement had sufficient time to consider the legal advice given by their lawyers.
With regard to unreasonable and grossly unfair behaviour, the Supreme Court explained that "if the disadvantaged party makes an indication against themselves because they are inferior, the other party takes advantage of such a disadvantage," the Supreme Court explained. Then even if the intention of the weak party is made voluntarily or independently, it will constitute an unreasonable and manifestly unfair act.
In this case, Thorne came to Australia alone and was about to have a wedding, and Kennedy made it clear that it would not sign an agreement and not marry, that Thorne's property and feelings depended on Kennedy, and looked forward to working with Kennedy for a lifetime, which had put Thorne at a clear disadvantage. In this case, Kennedy makes very harsh and unfair terms, which can be counted as exploiting the weakness of Thorne.
A time-tested property agreement requires careful planning, high-level drafting skills, and professional assistance.
